The Regional Administrative Court in Warsaw in its judgment of 29 July 2016 (ref. no. III SA/Wa 152/15) held that activities involving coordination (on behalf of an insurance company) of actions aimed at determining the degree of detriment to health after an accident are not exempt from VAT.
The case involved a company providing services for and on behalf of insurance companies in the field of medical services for the implementation of the main service of these companies, i.e. the assessment of the degree of detriment to the health of the insured after an accident. The services consisted in issuing medical opinions based on a history of injuries and accidents, performing necessary medical tests, issuing complementary opinions, organizing tests, medical committees and contacting clients. Some of the tasks (medical examinations, drawing up medical opinions) were performed by third parties under contracts with physicians and medical consulting rooms as partner organizations.
In connection with the above tasks, the company addressed a question to the Director of the Tax Chamber in Warsaw: „Are such activities consisting in organizing and coordinating actions aimed to perform (by third parties) medical examinations or drawing up medical opinions for and on behalf of insurance companies, related to the assessment of the degree of detriment to health of the insured after an accident, in order to determine the amount of benefits and to the drawing up medical opinions concerning handling of claims exempt from VAT under Art. 43 par. 13 in conjunction with Art. 43 par. 1 item 37 of the Act on tax on goods and services?.”
The company argued that its activities are of an outsourcing character related to the course of assessing the degree of detriment to the health of the insured after an accident (in order to determine the amount of benefits) and drawing up of medical opinions on medical matters related to the handling of a claim. This process is a necessary measure for insurance activity in the form of a decision on the amount and manner of implementation of the benefits arising from the insurance contract. Therefore, since determining the amount of damage and the size of compensation to eligible persons under insurance contracts are insurance activities, then taking up by the company activities to notify the injured party about the date, time and venue of medical examinations, organizing the process of assessing the degree of detriment to health and issuing medical opinions should be considered as part of this service, necessary and appropriate to implement it, while constituting a separate entity. As a result, the company was of the opinion that the services provided by it for and on behalf of insurance companies can benefit from VAT exemption.
The Director of the Fiscal Chamber in Warsaw in its interpretation of 4 September 2014 (ref. no. IPPP2/443-540/14- 2/RR) recognized the company’s position as incorrect. In his view, the activities provided by the company are ancillary activities, provided on behalf of an insurance company. He also stressed that in accordance with Art. 43 par. 13 of the Act on the tax on goods and services, services subject to VAT exemption must be relevant to the basic service, i.e. insurance service. However, the service in question, as indicated by the Director of the Chamber, are of a technical nature, i.e. aimed at the coordination of medical examinations performed by a third party and providing the insurance company with the appropriate documentation, which will help him in the process of finalizing the handling of claims. Therefore, these services cannot be considered appropriate for an insurance company or specific and typical element for insurance services.
The Court upheld the position of the Director of the Fiscal Chamber and stated that the activities in question cannot be considered appropriate for the insurance sector within the meaning of Art. 43 par. 13 in conjunction with Art. 43 par. 1 item 13 of the Act on tax on goods and services. Consequently, these activities are not exempt from tax.
In its oral justification of the judgment, the Court pointed out that relevant for the case is to determine what is meant by „appropriate activity.” The Court found that the activities described by the company can be assigned to an insurance service. However, the activities carried out by the company related to the organization of the process to estimate the damage caused, and involving the coordination of issuing a medical opinion in the context of detriment to health cannot be considered appropriate for the insurance sector. There is no direct or indirect relationship.
